INDIRECT TAXATION

We have with us extensive experience in successfully handling the service requirements of handling consultancy services for Value Added Tax. It is a form of indirect Tax and is in nature of multipoint sales tax that needs to be paid to state in form of VAT. It is levied under Central and State VAT legislation and depends on movement of goods in pursuance of sale transaction. If transactions involve movement of goods from one state to another, this tax is levied under Central Sales Tax Act (CST), 1956.

This Act also covers transactions of import of goods into or export of goods out of India. Sales tax is not imposed on import of goods into the country or export of goods out of the country. The rates of tax under Central Sales Tax Act vary from state to state and product to product. The standard rate of CST is 2 per cent or the lower rate applicable in the state of seller if the purchaser is purchasing the same for resale or for use in manufacture of goods for sale or for specified purposes and both the seller and buyer are registered dealers. Otherwise, the rate is higher of 12.5 per cent or the rate applicable in the state of sale.

The transactions of sales or purchases involving movement of goods within a state (intra-state) are governed by respective State Sales Tax Acts. States also levy tax on transactions which are “deemed sales” like works contracts and leases. A works contract essentially is a contract for carrying out work involving supply of labor and material where the property in the materials passes during the course of execution of the contract. Lease is a transaction involving transfer of right to use goods.

The standard rate of VAT is 12.5 per cent and there is reduced rate of 5 per cent. Besides that, there are exemptions and rate of 1 per cent and 20 percent for specified products. In addition to sales tax, some states also levy additional tax / surcharge, turnover tax or entry tax.

Sales tax / state VAT is payable by the seller to the government. Ordinarily, sales tax / state VAT is recovered from the buyer as a part of consideration for sale of goods.